164)
Bagwell’s net income for the year ended December 31, Year 2 was $185,000. Information from
Bagwell’s comparative balance sheets is given below. Compute the cash received from the sale of
its common stock during Year 2.
At December 31
Year 2
Year 1
Common Stock, $5 par value
$500,000
$450,000
Paid-in capital in excess of par
948,000
853,000
Retained earnings
688,000
582,000
A) $145,000. B) $50,000. C) $95,000. D) $106,000. E) $185,000.
165)
Bagwell’s net income for the year ended December 31, Year 2 was $175,000. Information from
Bagwell’s comparative balance sheets is given below. Compute the cash paid for dividends during
Year 2.
At December 31
Year 2
Year 1
Common Stock, $5 par value
$500,000
$450,000
Paid-in capital in excess of par
948,000
853,000
Retained earnings
688,000
582,000
A) $95,000. B) $69,000. C) $79,000. D) $201,000. E) $50,000.
166)
Scranton, Inc. reports net income of $230,000 for the year ended December 31. It also reports
$87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its comparative balance
sheet reveals a $35,500 decrease in accounts receivable, a $15,750 increase in accounts payable,
and a $12,500 decrease in wages payable. Calculate the cash provided (used) in operating activities
using the indirect method.
A) $356,450. B) $376,450. C) $263,750. D) $319,950. E) $351,450.
167)
Alvez Company reports net income of $305,000 for the year ended December 31. It also reports
$93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance
sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a
$15,200 increase in accounts payable, a $12,500 decrease in wages payable, and a $100,000
decrease in notes payable. Calculate the cash provided (used) in operating activities using the
indirect method.
A) $361,000. B) $371,400. C) $461,800. D) $351,000. E) $381,400.
168)
Alvez reports net income of $305,000 for the year ended December 31. It also reports $93,700
depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet
reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a
$15,200 increase in accounts payable, a $12,500 decrease in wages payable, a $75,000 increase in
equipment, and a $100,000 decrease in notes payable. Calculate the net increase in cash for the
year.
A) $281,400. B) $381,400. C) $206,400. D) $406,400. E) $216,400.
169)
Fernwood Company is preparing the company’s statement of cash flows for the fiscal year just
ended. The following information is available:
Retained earnings balance at the beginning of the year $233,000
Cash dividends declared for the year 50,000
Proceeds from the sale of equipment 85,000
Gain on the sale of equipment 4,500
Cash dividends payable at the beginning of the year 22,000
Cash dividends payable at the end of the year 30,000
Net income for the year 110,000
A) $343,000. B) $301,000. C) $213,000. D) $293,000. E) $297,500.
170)
Fernwood Company is preparing the company’s statement of cash flows for the fiscal year just
ended. The following information is available:
Retained earnings balance at the beginning of the year
$233,000
Cash dividends declared for the year
50,000
Proceeds from the sale of equipment
85,000
Gain on the sale of equipment 4,500
Cash dividends payable at the beginning of the year 22,000
Cash dividends payable at the end of the year 30,000
Net income for the year 110,000
The amounc of cash paid for dividends was:
A) $60,000. B) $42,000. C) $52,000. D) $58,000. E) $50,000.
171)
Marshland Company is preparing the company’s statement of cash flows for the fiscal year just
ended. The following information is available:
Cash dividends declared for the year
$ 40,000
Cash dividends payable at the beginning of the year
17,000
Cash dividends payable at the end of the year
13,000
The amount of cash paid for dividends was:
A) $57,000. B) $53,000. C) $36,000.
D) $40,000.
E) $44,000.
172)
If a company is using the indirect method to prepare the statement of cash flows, identify where an
increase in the accounts receivable account should be reported:
A)
A decrease in cash flows from investing activities
B)
An increase in cash flows from operating activities
C)
An increase in cash flows from investing activities
D)
A decrease in cash flows from operating activities
E)
An increase in cash flows from financing activities
173)
A decrease in the inventory account during the year should be reported on the indirect method
statement of cash flows as:
A)
An increase in cash flows from financing activities
B)
A decrease in cash flows from operating activities
C)
An increase in cash flows from operating activities
D)
An increase in cash flows from investing activities
E)
A decrease in cash flows from investing activities
174)
A cash dividend payment to shareholders during the year should be reported on the statement of
cash flows as:
A)
A decrease in cash flows from operating activities
B)
A decrease in cash flows from investing activities
C)
A decrease in cash flows from financing activities
D)
An increase in cash flows from investing activities
E)
An increase in cash flows from financing activities
175)
Northington, Inc. is preparing the company’s statement of cash flows for the fiscal year just ended.
Using the following information, determine the amount of cash flows from operating activities using
the indirect method:
Net income
$182,000
Gain on the sale of equipment
12,300
Proceeds from the sale of equipment
92,300
Depreciation expense — equipment
50,000
Payment of bonds at maturity
100,000
Purchase of land
200,000
Issuance of common stock
300,000
Increase in merchandise inventory
35,400
Decrease in accounts receivable
28,800
Increase in accounts payable
23,700
Payment of cash dividends
32,000
A) $332,200. B) $186,800. C) $236,800. D) $261,400. E) $189,400.
176)
Northington, Inc. is preparing the company’s statement of cash flows for the fiscal year just ended.
Using the following information, determine the amount of cash flows from investing activities:
Net income
$182,000
Gain on the sale of equipment
12,300
Proceeds from the sale of equipment
92,300
Depreciation expense — equipment
50,000
Payment of bonds at maturity
100,000
Purchase of land
200,000
Issuance of common stock
300,000
Increase in merchandise inventory
35,400
Decrease in accounts receivable
28,800
Increase in accounts payable
23,700
Payment of cash dividends
116
32,000
Payment of cash dividends 32,000
A) ($200,000).
B) ($139,700).
C) ($107,700).
D) $107,700.
E) ($207,700).
177)
Northington, Inc. is preparing the company’s statement of cash flows for the fiscal year just ended.
Using the following information, determine the amount of cash flows from financing activities:
Net income
$182,000
Gain on the sale of equipment
12,300
Proceeds from the sale of equipment
92,300
Depreciation expense — equipment
50,000
Payment of bonds at maturity
100,000
Purchase of land
200,000
Issuance of common stock
300,000
Increase in merchandise inventory
35,400
Decrease in accounts receivable
28,800
Increase in accounts payable
23,700
Payment of cash dividends
32,000
A) $191,700.
B) $168,000.
C) $200,000.
D) ($168,000).
E) ($191,700).
178)
A company had average total assets of $3,216,000, total cash flows of $1,320,000, cash flows from
operations of $554,000, and cash flows for plant assets of $850,000. The cash flow on total assets
ratio equals:
A) 17.23%. B) 64.39%. C) 41.04%. D) 41.97%. E) 26.43%.
SHORT ANSWER QUESTIONS
179)
Match each of the following items with the appropriate definitions.
(A) Financing activities
(B) Investing activities
(C) Statement of cash flows
(D) Indirect method
(E) Direct method
(F) Operating activities
________ (1) A method of computing and reporting that involves adjusting the net income amount
by adding and subtracting items that are necessary to yield net cash provided (used) by operating
activities.
________ (2) A financial statement that reports the cash inflows and cash outflows for an accounting
period, and classifies those cash flows as operating, investing, or financing activities.
________ (3) A method of computing and reporting the net cash provided (used) by operating
activities that lists the major items of operating cash receipts, and then subtracts the major items of
operating cash payments.
________ (4) Transactions that include making and collecting notes receivable or purchasing and
selling plant assets, or investments in other than cash equivalents and trading securities.
________ (5) Transactions with a company’s owners and creditors that include obtaining cash from
issuing debt and repaying the amounts borrowed, and obtaining cash from or distributing cash to
owners.
________ (6) Activities that involve the production or purchase of merchandise and the sale of goods
or services to customers, including expenditures related to administering the business.
180)
For each of the following items, indicate whether it would be classified as an (O) operating activity,
an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing
activity.
________ (1) Received cash dividends from investments in trading securities.
________ (2) Collected accounts receivable from customers.
(3) Issued bonds payable for cash.
________ (4) Paid wages to employees.
________ (5) Issued stock for cash.
________ (6) Sold equipment for cash.
________ (7) Purchased land in exchange for a note payable.
________ (8) Paid cash dividends.
(9) Received interest from investments in trading securities.
(10) Purchases of land for cash.
181)
For each of the following items, indicate whether it would be classified as either an (O) operating
activity, an (I) investing activity, a (F) financial activity, or a significant (N) noncash financing and
investing activity.
________ (1) Cash sales of merchandise.
________ (2) Sale of land for cash.
________ (3) Signed a note payable in exchange for cash.
________ (4) Purchased supplies for cash.
________ (5) Paid cash to settle an account payable.
________ (6) Purchased a warehouse in exchange for shares of its stock.
________ (7) Paid interest on a note payable.
________ (8) Reissued treasury stock.
________ (9) Purchased equipment for cash.
________ (10) Purchased equipment in exchange for a 6-month note payable.